Summary
The private equity industry is of growing importance; 8% of
the UK workforce is now employed in private equity owned companies and there
are a rising number of take-overs of large companies.
'Private
Equity: Volume II' (HC 567-II) presents evidence given to the Treasury
Select Committee’s inquiry into the private equity industry.
The
Report
‘Private
Equity: Volume I’ (HC 567-I), published in July 2007, looks at the highly
leveraged management buy-in and buy-out sector, whilst the larger issue of the
impact of the sector on the UK economy will be addressed in a later report. It
examines the respective advantages of the private equity and PLC (public
limited company) model and concludes there are benefits and disadvantages in
both.
However, there is debate as to how much of the profit of
large-scale takeovers is attributable to financial engineering rather than
value creation. There is also the question of why major investors have
different requirements for PLCs and private equity owned companies. The higher
the leverage of a takeover, the greater the risk and the Committee invite the
Bank of England to research the likely impact of an economic downturn, and the
Financial Services Authority (FSA) to seek assurances that the banking system
is the appropriate system to manage the risks.
'Private
Equity: Volume II' (HC 567-II) presents evidence given to the Treasury
Select Committee’s inquiry into the private equity industry. Witnesses included
Chris Gibson-Smith, Chairman of the London Stock Exchange, John Cridland,
Deputy Director-General of the CBI and Damon Buffini, Managing Partner of
Permira. Written evidence was submitted by many stakeholders, including Goldman
Sachs and UBS Investment Bank.
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